SEBI abolishes transaction fee payouts to Mutual Fund distributors

Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2025/115, Dated 08.08.2025

1. Existing Norms on Transaction Fees

Under the earlier regulatory framework, Asset Management Companies (AMCs) were permitted to pay a transaction fee to Mutual Fund (MF) distributors for subscriptions exceeding ₹10,000. This was intended as an incentive for distributors to facilitate large-ticket investments in mutual fund schemes.

2. SEBI’s Decision to Abolish Transaction Fees

In a recent move, SEBI has abolished the provision allowing such transaction fees. This change effectively means AMCs will no longer be required to pay separate distribution charges to MF distributors for large-value subscriptions.

3. Clarification on Distributor Remuneration

SEBI has clarified that MF distributors, being agents of the AMCs, are already entitled to remuneration from the AMCs in the form of commissions or other agreed payments. Therefore, an additional transaction fee for large investments was deemed unnecessary.

4. Impact on Mutual Fund Industry Practices

With the removal of these charges, the distribution model may become more streamlined and cost-efficient for AMCs, while also ensuring that investors’ funds are not indirectly impacted by redundant distribution costs. This move aligns with SEBI’s ongoing efforts to simplify and rationalise mutual fund fee structures.